Fighting keeps Burundi Real Estate in the past

Burundi’s real estate market has been stifled by unrest in the country for decades. Currently rebels in the country are trying to oust the country’s President Pierre Nkurunziza [PIcture: Reuters]

Burundi’s real estate market has been stifled by unrest in the country for decades. Currently rebels in the country are trying to oust the country’s President Pierre Nkurunziza.

Africa Property News.com has learned that the rebels call themselves the Republican Forces of Burundi - or "Forebu" from its name in French, Les Forces Republicaines du Burundi - said Edward Nshimirimana, a former army colonel this week.

The group said it came together "to protect the population" and uphold the Arusha agreement, which ended the 1993-2006 civil war that killed an estimated 300,000 people. But there has still been daily shooting for weeks in the country. This has worried potential investors more than usual. Many funds have clauses in their investment mandates which state that they cannot invest in countries which are experiencing severe war torn unrest. The idea from market analysts is however that Burundi’s unrest will ease in early 2016.

The possibility of the government ceasing assets at any time has, in the past, discouraged many offshore large institutional investors. Others have managed to make agreements with the state there. However, these have tended to be smaller investors, many of whom have been from within Burundi itself. A problem has been that the real estate market there still needs larger investors to build modern shopping centres and offices.

Burundi's Property Market

Burundi which is located in Central Africa is the most densely populated country in Sub-Saharan Africa. This is despite having a population of about 10-million people. Commentators believe that since the country is so densely inhabited, residential property has been a priority. As much as 80% of the property market in Burundi is residential. But this has meant that little investment has gone to retail and offices. Even so, the country still has a housing crisis meaning that especially affordable housing projects are needed. Burundi’s commercial real estate market needs to partner with markets nearby it. Burundi is encircled by Rwanda, Tanzania and the Democratic Republic of Congo.

Some real estate professionals have set up projects with Rwandan professionals. Rwanda’s commercial property market is the strongest in Central Africa. After civil unrest and a genocide in Rwanda in the early 1990s, the country pulled itself together in a big way and opened itself up to major investment. To do this it made it easier to register business and tabled advanced company legislation.

Jackie van Niekerk, a director at Mara Delta, the largest listed pan African property fund, says Rwanda stands out as having the strongest real estate market in the region.

“It will take time for Central Africa to attract investment from large money within the continent and from abroad. We are interested in Rwanda. We believe that other Central African countries can learn from Rwanda’s steps of making business easier in the country. Also property groups in places like Burundi could do projects with Rwanda and its other neighbours,” she said.

Burundi is inhabited by various tribal ethnic groups. The majority are of the Hutu ethnic group or 85%. The Tutsi group account for 14% of the population, and the Twa make up 1%.

The economy remains largely dependent on subsistence agriculture with coffee being the main cash crop. But too much of the economy remains reliant on donor aid. Agriculture accounts for just over 30% of the country’s gross domestic product and employs over 90% of the population. Other than gold, Burundi’s main exports tea a d coffee account for roughly 90% of foreign exchange earnings, although these exports are a fairly small share of GDP. Motor vehicles for the transport of goods are also one of South Africa’s top exports to Burundi. This makes sense as many German designed cars are assembled in SA.

Therefore, Burundi’s commercial property market needs to develop high quality offices. These would then attract new companies to the country.

One global company that does operate in Burundi is Shoprite. The retailer has spread across Africa and realises it can spread its operations to other parts of Central Africa by using Burundi as a springboard.

The Resilient Africa group which develops properties in Africa may develop in Burundi in the near future. Shoprite has been a major partner for the company especially in Nigeria where it is building a number of shopping malls. It owns Delta Mall in Africa’s largest economy and is building another four malls.

Various South African companies including small and medium enterprises may soon invest in Burundi and have done extensive research into the country and its markets

The trade and investment promotion agency of South Africa’s Western Cape Province, WESGRO for example regularly holds the Burundi Business Networking Meeting in Cape Town to promote the business opportunities in Burundi for South African companies. The event has been attended by a number of Burundi representatives – including the Burundi Ambassador to South Africa, Isaïe Ntirizoshira, and the mayor of Burundi’s capital Bujumbura, Saidi Juma – as well as a number of SMEs and various entrepreneurs from South Africa.

The World Bank Doing Business Report for 2015 ranked Burundi 152 out of 189 countries, compared with a position of 171 in 2011, following implementation of a number of reforms that have facilitated ease of starting a business, trading across borders, registering property and promoting tax compliance.

One issue that makes it difficult for Burundi and other emerging markets to grow is the effects of global economic factors. Burundi’s currency, the Burundian Franc, tracks the South African rand. This is because South Africa is seen as the benchmark economy for emerging African economies in the eyes of investors. Since the rand has been so weak in 2015, losing about 30% of its value against the US dollar, the Burundian Franc has been affected very negatively.

Unfortunately, this is unlikely to begin in 2016. Jay Padayatchi of Meago Asset Managers says he believes Africa remains a long term play and that the rand will persist to be weak. It is unlikely that many outside funds or private equity groups will attempt to develop in parts of Africa like Burundi where they have not operated before, especially while Burundi undergoing tremendous violence and civil unrest.